MARKET WATCHSupply losses boost energy futures prices

Energy futures prices jumped Tuesday as traders returned to the New York market after a long Independence Day holiday to face disruptions of crude exports from Iraq and Nigeria.

July 7, 2004

3 min read

Sam Fletcher
Senior Writer

HOUSTON, July 7 -- Energy futures prices jumped Tuesday as traders returned to the New York market after a long Independence Day holiday to face disruptions of crude exports from Iraq and Nigeria.

Damage to an Iraqi oil pipeline over the weekend (OGJ Online, July 6, 2004) was reported to be almost repaired by Wednesday, with crude exports expected to resume within a few days. But meanwhile, the suspension of 800,000 b/d of Iraqi crude exports frightened traders.

Dow Jones Newswires reported Tuesday that exports of petroleum products from Saudi Arabia into Iraq were halted after delivery tankers came under fire. The wire service reported a local contractor halted indefinitely all delivery tankers from entering Iraq at the Jadidat Arar border crossing after 75% of its vehicles came under fire, damaging tankers and injuring drivers. A local newspaper said Tuesday no oil tanker has entered Iraq for 5 days.

Although it has huge oil reserves, Iraq's aging refineries cannot meet that country's own demand for gasoline and gas oil.

Tuesday, Total SA shut down its production in Nigeria after workers threatened to strike. An ExxonMobil unit in Nigeria also faces a possible strike by oil workers, officials said.

Energy prices
The August contract for benchmark US sweet, light crudes jumped by $1.26 to $39.65/bbl Tuesday on the New York Mercantile Exchange, the highest settlement for a front-month contract since June 2. The September contract also increased by $1.26, to $39.72/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., gained $1.27 to $39.65/bbl.

Gasoline for August delivery continued to escalate, up by 2.77¢ to $1.2721/gal on NYMEX. Heating oil for the same month closed at $1.0931/gal, up by 2.04¢ for the day, after hitting a 16-month high of $1.106/gal Tuesday.

The August natural gas contract shot up by 27.6¢ to $6.42/Mcf on NYMEX. That market got "an additional boost by a shift to warmer weather forecasts," said analysts Wednesday at Enerfax Daily. "But despite the possibility of a short-term price surge, natural gas fundamentals remain benign. Current weather conditions remain relatively mild, but a significant warming trend next week is coming, although the official forecast is still calling for only moderate heat," they said.

In London, the August contract for North Sea Brent jumped by 88¢ to $37.18/bbl Tuesday on the International Petroleum Exchange. Gas oil for July delivery was up by $7.75 to $351/tonne. However, the August natural gas contract dropped by 3.6¢ to the equivalent of $4.03/Mcf on the IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes gained 70¢ to $35.58/bbl Tuesday.

Contact Sam Fletcher at [email protected]